The Hangar42 film studio scandal in Grand Rapids continues to grow. This week a second person was charged with felony fraud for allegedly inflating the sale price of a piece of property in order to get more tax credits from the state. Some film incentive supporters may argue that since the scam was caught early enough (thanks to the Mackinac Center), no tax credits were granted and therefore Michigan taxpayers lost no money in the deal.

Nevertheless, information obtained by a state Attorney General investigator should be alarming to all taxpayers. The investigator’s affidavit states that the accused tried to sell the $10 million in assignable Michigan tax credits “to a company in Rhode Island for an instant cash payment” of $8.7 million.

If not for the questions initially raised by the Mackinac Center, this scheme could have very well cost Michigan taxpayers, and worse, done so without their knowledge. This case is just one example of what can happen when government is allowed to be selective — and secretive — about their handouts.

Late last year, two bills (SB 796 and SB 889) calling for more transparency in the film subsidy program were signed into law.

And according to a recent article in MIRS (subscription required), Gov. Rick Snyder proposes an end to a laundry list of tax credit cuts, including those for the film industry:

“Gov. Rick Snyder's administration gave business groups today a peek of its vision of a stripped-down six-percent corporate income tax that eliminates the MEGA, brownfield, film and every other state business tax credit outside of one small business tax credit.”

While the Mackinac Center has thoroughly documented their ineffectiveness, tax credit programs like the film incentives likely attract plenty of honest folks with genuine intentions of creating jobs. However, as the current law stands, these programs can also pave the way for temptation to hatch schemes like Hangar42.

For these reasons alone, there should be no hang-ups about doing away with these government goody programs.

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See also:

Mackinac Center Investigation Leads to Criminal Charge

Attorney General Heeds Requests for Investigation of Embattled Film Studio

MEGA Careful?